“I have $1,000 to invest. What should I do with it?”
I’ve been asked this question many times because I write about personal finance. I usually don’t know how to answer this question because I can’t tell if the person wants real financial advice or if they want a get rich quick scheme. There’s no such thing as a one-size-fits-all solution when it comes to investing your money.
When you’re a rookie investor, it’s easy to fall into traps with your money. Here are the things you need to know about investing:
1. Never invest your hard earned money because of a “hot” tip
I’m fed up with these “hot” investment tips you find all over the web. If someone gives you unsolicited advice about with what to do with your money, proceed with caution. There’s no such thing as the best investment tip. Why would a stranger give you a tip that’s worth millions of dollars for no reason? Plus, by the time Joe Schmoe has caught on, the stock has probably already peaked.
2. Your uncle is a nice guy, but it’s YOUR money
We all have that relative with all sorts of investment strategies. While I believe my uncle means well, I’m not going to risk all of my money on his new business idea. This applies to all relatives and friends. Be wary of anyone looking to have you get in on their new business.
3. Know what you’re getting into
Do you know exactly what you're getting into? A friend of mine recently got himself involved with some interesting characters. They convinced him to put up a few hundred dollars and he didn’t even know what he was getting himself into. It was confusing and he didn’t get how the investment worked. If the investment can’t be explained to you, then you likely shouldn’t get into it.
4. Decide your level of investing
How much money do you have saved? How much money do you have coming in? This is where you can decide at which level you want to start. With a few bucks, you can start an online business. Once you start to save up more you can get into the stock market. Eventually you can get into real estate and higher end investments, if you’re comfortable. It’s important to start off at the right level. You may not want to start looking into investment properties until your savings are up there.
5. Don’t risk everything
I know that every movie and success story is about a person that risked it all with their investment. I personally don't believe in this strategy. Start slow so that you don’t get too stressed out. Test the waters first, and get comfortable, before increasing the amount of risk you take on.
6. Be patient
It took you a decent amount of time to build up your savings. There’s no need to rush into your first investment, whether you are looking at individual stocks or choosing a mutual fund. It’s okay to wait. Sometimes the best investment is the one that you don’t make.
Those are my best tips for the rookie investor. We all know that you need to take a few risks in life sometimes. Don’t go broke because of a random investment tip that a friend shared with you at the gym.